VVIP chopper scam: What the govt has to say

New Delhi: The government on Thursday formally asked Italian firm Finmeccanica to state whether any money was illegally paid to any Indian entity or individual amidst its warning of legal action including blacklisting of the firm.

Finmeccanica CEO Giuseppe Orsi. AFP

The Ministry of Defence, which is under attack over the issue, came out with a fact-sheet detailing the sequence of the Rs 3,600 crore deal for 12 helicopters clinched in 2010 by a Finmeccanica subsidiary AgustaWestland.

It notes that the mandatory technical requirements of the chopper were changed in the tender during the Vajpayee government in 2003, with the then National Security Adviser Brajesh Mishra playing a key role.

The CEO of AgustaWestland has been asked to "categorically state the clear position in view of the current developments indicating specifically if any financial transaction has taken place with any Indian individual/entity which would be violative of the Integrity Pact or any other terms and conditions of the contract," it said.

Noting that the contract with AgustaWestland carried an integrity pact that bars paying of bribes or involvement of middlemen, the Ministry warned of "strict action including cancellation of contract, recovery of payment, blacklisting and penal action can be taken against the vendors."

It said the Government is "determined to take all possible legal and administrative action against the guilty parties and accordingly has ordered a thorough probe by CBI."

The fact-sheet said that the first Request for Proposal was issued in March 2002 mandating a requirement of 6,000 metre (18,000 feet) flying altitude for selection of the chopper.

This requirement made it clear that AgustaWestland could not participate in the deal.

However, in a meeting convened by the Principal Secretary to PM on November 19, 2003, the prinicipal secretary "observed that his main concern was that the framing of the mandatory requirements has led us effectively into a single vendor situation."

The Defence Ministry fact-sheet states that in a meeting convened by the then NSA, it was also noted that the President and the Prime Minister have rarely made visits to places involving flying at an altitude beyond 4500 metres and therefore it was decided to make the mandatory requirement for operational altitude 4500 meters.

"The higher flying ceiling of 6000 meters, and a cabinet height of 1.8 meters could be made desirable operational requirements," it said.

The then NSA also suggested that the then IAF Chief ACM S Krishnaswamy and Defence Secretary may jointly review the matter to draw up realistic mandatory requirements satisfying operational, security and convenience requirements of VVIPs and also set in motion a fast track process for selection and acquisition of the replacement helicopters.

"In pursuance of the above directive, the Operational Requirements (ORs) were deliberated at length between IAF, NSA, SPG/PMO and Defence Ministry between March, 2005 to September, 2006 and the above indicated changes were incorporated," the Ministry fact-sheet stated.

In these deliberations, the stakeholders took a decision to increase the number of choppers for VVIP duties from eight to 12.

After freezing the requirements, the Ministry issued the RFP on September 27, 2006 after which four vendors, namely Sikorsky, AgustaWestland, AW-101 helicopter and Russian Rosoboronexport responded to it. The Russian firm's bid was rejected as it did not deposit the earnest money and integrity pact.

After comprehensive field evaluation trials, in which the Special Protection Group was also represented, Sikorsky was declared to be non-compliant for not meeting four staff requirements.

The Ministry said during the contract negotiations, the Air Headquarters recommended inclusion of more systems on-board the chopper including Traffic Collusion Avoidance System (TCAS-II) and Enhanced Ground Proximity Warning System (EGPWS) for all 12 helicopters and SPG/PMO recommended inclusion of Medevac System for 8 VVIP helicopters.

After agreeing to induct these systems on board the choppers, the Contract Negotiations Committee (CNC) thereafter, recommended conclusion of the contract at a negotiated price of Euro 556.262 million (around Rs 3,600 crore).

"On completion of CNC the proposal was submitted for approval of the Cabinet Committee on Security (CCS), which considered the proposal in its meeting held on 18 January 2010 and approved the proposal and a contract was signed on February 8, 2010," the Ministry said.

The Defence Ministry said the contract signed with AgustaWestland includes "specific contractual provisions against bribery and the use of undue influence. Article 22 of the contract deals with penalty for use of undue influence. This clause entitles the ‘Buyer’ to cancel the contract with the ‘Seller’ and recover from him the amount of any loss arising from such cancellation."

"Article 23 of the contract entitles the ‘Buyer’ to consider cancellation of the contract without any entitlement or compensation to the ‘Seller’ who shall be liable to refund all payments made by the ‘Buyer’ in terms of the contract along with interest," it said.

The Ministry said any breach of the provisions of the Integrity Pact entitles the ‘Buyer’ to take actions against the ‘Seller’ which includes forfeiture of the earnest money, performance bond, cancellation of the contract without giving any compensation, to recover all the sums already paid with interest, to cancel any other contracts.

It also debars the bidder from entering into any bid from the Government for a minimum period of five years which may be extended.

The Defence Ministry said soon after the issue of alleged bribery came up in the media, it sought information from Italy and the UK about their investigations.

"Ministry received more than one communication from AgustaWestland confirming that the statements in the press are "completely unfounded and have been issued with malicious intent" and that 'no commissions whatsoever were paid' in the case," it said.

The Ministry said a letter was received by it from the Director, Income Tax (Investigations) regarding allegations against Indians possibly involved in the deal as middlemen and seeking information about them.

"The current status of the case was conveyed to the income tax authorities in January 2013, in return, the Defence Ministry asked Income Tax to share with it any 'credible information'," it said.